The Latest from the Prospect
 â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â
Â
View this email in your browser
<[link removed]>
**APRIL 26, 2023**
Kuttner on TAP
****
****
****
****
****
****
****
**** The Soaking at Bed Bath & Beyond
Who bought all that stock, as the retailer was on the route to
bankruptcy?
One thing about the Bed Bath & Beyond bankruptcy doesn't add up and
cries out for an investigation by the SEC or the Senate Banking
Committee, or both. While the company was obviously cratering, it still
managed to sell a lot of stock.
Someone promoted the stock sale, made money unloading it, and some poor
suckers bought it. They took the bath.
Here's some history. From its founding in 1971, Bed Bath & Beyond grew
into an iconic retailer with 1,550 stores. It overexpanded, faced new
online competition, and began a string of money-losing years in 2019.
The pandemic only worsened things.
But instead of conserving its money for working capital, the company
tried to keep its stock price up by continuing to buy back its own
shares, while it borrowed still more money. Since 2004, it spent a
massive $11.8 billion on stock buybacks, more than twice the debt it
carried on its books.
The buybacks succeeded in pumping up its share price-for a time. For
most of 2021, its stock traded at between $20 and $30 a share.
However in 2022, its losses mounted and the company began warning of a
possible bankruptcy. The CEO, Mark Tritton, who had been brought in from
Target in 2019, was fired in June 2022, and the chief financial officer
was a suicide in September.
The company mounted a last-ditch plan to sell 150 stores, raise more
money, and somehow return to profitability. As late as February 2023,
Hudson Bay Capital, a hedge fund based in Greenwich, Connecticut, agreed
to finance a new stock offering by buying up to $800 million worth of
Bed Bath & Beyond shares. The stock price briefly rallied and then
started falling again.
According to
**The Wall Street Journal**, Hudson Bay ended up buying about $360
million of convertible preferred shares
<[link removed]>,
which the hedge fund then converted to shares of common stock and sold
on the open market. Hudson Bay must have taken a good look at the
company books and seen a high-risk, possibly high-gain, play. It's
hard to believe that Hudson Bay sold at a loss, though even hedge funds
do make mistakes.
But the dumb money that bought the shares must have taken the serious
loss. With the company now in bankruptcy, Bed Bath & Beyond shares,
which were trading at almost $6 as recently as February, are now trading
at 12 cents.
Hedge funds are exempt from the kinds of disclosures required of other
financial companies, so the reality is not public record. And Bed Bath &
Beyond's true condition was partly disguised by its stock buybacks.
Add to the list of needed financial reforms: more transparency for hedge
fund operations; and an outright prohibition of stock buybacks.
No amount of SEC regulation can save dumb managers from their own folly.
But at least we can provide better protection of investors (which is the
whole point of the SEC).
~ ROBERT KUTTNER
To receive this newsletter directly in your inbox, click here to
subscribe. <[link removed]>
Follow Robert Kuttner on Twitter <[link removed]>
[link removed]
Born to Die
<[link removed]>
Medicare spends tens of billions of dollars on hospice care each year. A
new report ponders why regulators insist on going easy on literal death
merchants. BY MAUREEN TKACIK
What Democrats Can Learn From Reporting on Supreme Court Corruption
<[link removed]>
The justices are sensitive to political pressure. Senate Democrats can
impose that pressure through investigation. BY RYAN COOPER
President Biden Must Appoint More Corporate Skeptics to Federal Courts
<[link removed]>
Republicans have been blasting right-wing propaganda at the judiciary
for 50 years. BY CAROLINE FREDRICKSON
Farewell to a Crypto-Nazi Blowhard
<[link removed]>
Tucker Carlson was fired from his Fox News job. Nobody has deserved it
more. BY PROSPECT STAFF
Â
[link removed]
Click to Share this Newsletter
[link removed]
Â
[link removed]
Â
[link removed]
Â
[link removed]
Â
[link removed]
YOUR TAX DEDUCTIBLE DONATION SUPPORTS INDEPENDENT JOURNALISM
<[link removed]>
The American Prospect, Inc., 1225 I Street NW, Suite 600, Washington, DC xxxxxx, United States
Copyright (c) 2023 The American Prospect. All rights reserved.
To opt out of American Prospect membership messaging, click here
<[link removed]>.
To manage your newsletter preferences, click here
<[link removed]>.
To unsubscribe from all American Prospect emails, including newsletters,
click here
<[link removed]>.
